If you’re like most people, you feel you should take steps to make sure that your spouse and other survivors will have sufficient resources if you die. If you are young and healthy, however, you may not put too much energy into worrying about what will happen to your loved ones if you die prematurely. But you may also realize that anything can happen to anyone, that you’re not immune from unexpected tragedy, and that you should be prepared for the worst. To minimize the risk of loss associated with premature death and to plan for the future of their survivors, most people purchase some form of life insurance. Others self-insure by saving or earmarking existing assets, while still others use some combination of life insurance and self-insurance. Another way to provide adequate resources for your survivors is through government benefits.
Social Security Survivor Benefits
For many people, the major source of government benefits for your survivors will be Social Security. In addition to regular Social Security benefits that are payable to most retirees, the federal government also provides survivor benefits payable under certain conditions to specified survivors of a retired or nonretired employee who dies. Generally, the survivors who may be entitled to receive these benefits at your death include your spouse, your former spouse, your dependent children, and your dependent parents. Usually payable in regular monthly installments, these survivor benefits will vary, based on your average lifetime earnings, the recipient(s) of the benefits, and other factors. Whatever the size of the benefits, Social Security survivor benefits provide a valuable means of financial support for the people you care about if you meet with an untimely end.
As with Social Security retirement benefits, your survivors’ eligibility for survivor benefits will depend on whether you are even part of the Social Security system. That is, you need to have contributed at least some of your earnings through payroll tax deductions to the federal government’s Social Security fund. As you contribute to the fund, you accumulate units of credit, and generally, you have to earn a certain number before your survivors can be eligible for benefits. Social Security survivor benefits are, in effect, a kind of pension or entitlement program that you become part of by paying into a fund. In this sense, the survivor benefit system differs fundamentally from regular life insurance that you buy, even though both are designed to provide funds that your survivors can draw on if you die prematurely.
Lump-Sum Death Benefit
If you die while fully or currently insured, a one-time lump-sum death benefit of a maximum of $255 is payable at your death if you are survived by a spouse who was living in the same household as you at the time of your death or by a spouse or dependent children eligible to receive Social Security benefits for the month of your death based on your earnings record. In addition, the death benefit may be payable under other circumstances as well.
Caution: While Social Security survivor benefits and the lump-sum death benefit can provide supplemental resources for your survivors, they will not be sufficient by themselves in most cases. You will probably need to take additional steps to ensure that your survivors have enough money to carry on and meet their various expenses if you die prematurely. Among others, these may include personal life insurance and earmarking existing assets as a kind of personal death benefit fund.
You should consult your financial planner and other resources to determine the particular strategy or set of strategies most appropriate for your circumstances.
Other Types of Government Benefits
Benefits for Federal Government Employees
If you are a federal government employee who qualifies in terms of length of service, your death may trigger benefits to certain of your survivors under either of two retirement systems for federal employees: the Civil Service Retirement System (CSRS) or the Federal Employees’ Retirement System (FERS). The benefits, which may be subject to restrictions based on whether you are also eligible for Social Security, are generally payable either in a lump sum or in regular installments (known as a survivor annuity). They are also payable regardless of whether you die before or after retirement.
Benefits for Military Personnel
If you are in the military, your survivors may be eligible for survivor benefits under the Survivor Benefit Plan in the event of your death. This plan provides survivor benefits for eligible widows, widowers, and dependent children of retired military personnel. You may be eligible for the Survivor Benefit Plan if you are married or have a dependent child when you become entitled to retired pay (although you may elect not to participate). The plan may provide for a reduction in benefits if some of your surviving beneficiaries are also eligible for Social Security benefits. Your survivors may also be eligible for dependency and indemnity compensation, a death pension, and other benefits.
Railroad Survivor Benefits
If you are a railroad employee or a retired railroad employee, your survivors may be eligible for one or more railroad survivor benefits if you die. Specifically, the Railroad Retirement Act may provide survivor annuities for certain of your survivors. You must have completed 10 years of railroad service and have had a current connection with the railroad industry at the time of your death. Your widow(er), surviving divorced spouse, or remarried widow(er) may receive an annuity based on such factors as age, disability, and whether he or she is caring for a child of yours. Subject to certain restrictions, other railroad survivor annuities may be payable to your dependent children, grandchildren, and parents.
Workers’ Compensation
If you die as a result of a job-related injury or illness, your survivors may be entitled to receive workers’ compensation survivor benefits based on your wages (subject to minimums and maximums) and on the number of your surviving dependents. Your survivors may also receive money for your burial expenses. Benefits are usually payable to your surviving spouse as long as he or she does not remarry, and to your dependent children up to a certain age.
If you have questions, contact the Experts at Henssler Financial:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166.
Disclosures
The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
